Yes, there was somewhat bad news. China uncovered RMB860 billion ($118.6 billion) in financial irregularities last year. This was reported on the China Banking Regulatory Commission Website. 117 bank managers had been removed from office.
Now for the good news:

Profits for Chinese banks grew to RMB298.7 billion at the end of 2007, up from RMB36.4 billion 2002, when the CBRC started operating.
Irregularities were down 58.4% from a year ago.
The average bad loan ratio for major Chinese banks dropped to 6.7% at the end of 2007 compared with 23.6% five years ago.
The total assets of Chinese banks’ topped RMB52.6 trillion at the end of 2007, from 2002’s RMB23.7 trillion and up on the previous year’s RMB43.95 trillion.
At the end of 2007, five Chinese banks have control or hold stakes in overseas financial players.
Seven Chinese banks have 60 overseas outlets with overseas assets topping $167.4 billion.

The regulator said it will draw lessons from the U.S. subprime crisis to improve its overseeing of new, innovative finance products.
Source: China View

Citibank, Standard Chartered and Bank of East Asia are all seeking to follow the lead of HSBC, which in August secured a license to set up a rural bank branch in the Chinese hinterland.

The government’s intention is that large financial institutions with rural branches will help redistribute the country’s wealth from the cities to the countryside.

The problem is that China already has one of the most extensive rural banking systems in the world and has problems with bad loans.

Agricultural Bank of China, one of China’s ‘big four’ banks, has closed many of its more remote branches in an attempt to become more economically viable.

There are also more than 32,000 rural credit co-operatives, which resemble micro-credit institutions in other parts of the world.

This year, however, rural incomes are rising — partly thanks to rising food price inflation and partly to the renewed political emphasis on the rural economy.

If farming incomes continue to rise, HSBC could even find opening a branch in the Chinese countryside has more benefits than originally thought. Our illustration shows HSBC’s China CEO Richard Yorke and volunteers from the bank demonstrating, perhaps, how to become sort of truly rural. In the picture they are planting trees in Paotaiwan Wetland Park in Shanghai for National Tree Planting Day.
Source: Financial Times

The People’s Bank of China has said on its web site China will raise the reserve requirement ratio by half a percentage point for commercial banks in an effort to cool the booming economy.

The move, which will take effect from November 26, will push the ratio to a ten-year high of 13.5%.

It is the ninth hike this year aimed at ’strengthening liquidity management in the banking system and checking excessive credit growth.’ This according to the central bank on its Web site.

The move came shortly after the central bank announced earlier this week its prediction that China’s economy would expand more than 11% for the whole of 2007, with inflation rising 4.5%.

To ensure rational credit growth, the central bank also said it would continue to implement a tightened monetary policy and take a variety of measures to strengthen the macro-control.

By the end of September, the M2, which covers cash in circulation plus all deposits, grew by 18.45% from a year ago to RMB39.3 trillion (US$5.2 trillion.)

China’s commercial banks lent out RMB3.36 trillion in the first nine months of this year, surpassing the full-year figure of 2006.

A long article in The Times that you should read. Click on Source at the end of the article.

Funds backed by foreign states could have $12,000 billion to invest by 2012. The financial muscle of these vehicles, are now causing alarm in the West. To put a block on it would suggest the West does not have an open economy.

These sovereign funds have been around since 1953. But it is only recently the power of sovereign funds has mushroomed. Now China has been boosted by income from huge trade surpluses.

Stephen Jen, chief currency economist at Morgan Stanley, estimates that even if China tries to rein in its current-account surplus, the country’s sovereign fund could grow by $200 billion a year, becoming the world’s largest within a few years.

Gerard Lyons, chief economist at Standard Chartered, said: ‘There is a serious likelihood of western governments and sovereign wealth funds clashing over what they can buy and where. A protectionist backlash against strategic investments is real and threatens global trade.’

China is putting $1 billion into Bear Stearns. This has made many Americans uneasy.
Industrial and Commercial Bank of China is putting $5.5 billion into Standard Bank, Africa’s biggest lender.
The China Development Bank bought a 3.1% stake in Barclays in July.
China Construction Bank in August agreed to buy Bank of America’s Hong Kong and Macao operations for $1.2 billion.
China is promising up to $8.5 billion of investment in the Democratic Republic of Congo in exchange for a slice of its mineral assets.
Last year, China signed a $1.6 billion deal with Angola to develop an oilfield in the African state. Read the full article. Well worth the time.

Source: Times Online

According to a recent survey by McKinsey & Company, Chinese with average annual incomes surpassing $50,000 hold the same optimistic attitudes toward risk investments and bank loans as their wealthy counterparts in Hong Kong and Singapore.

The number of wealthy Chinese has boomed and is currently about 1.5 million people but that number having a growth rate of about 15% a year.

The survey gathered data from more than 4,178 volunteers in 16 cities around 15 China’s provinces.

Some of the findings:

Every affluent Chinese consumer holds about 6.3 financial commodities in the forms of stocks, bonds and/or funds.
31% of the wealthy hold optimistic attitudes toward risk investments and bank loans. Prosperous people believe financial investment can improve their life.
About 41% of well-to-do Chinese are willing to take moderate or even higher investment risks to earn more profits. This is higher than Hong Kong and and much higher than Singapore where the figure is 24%.
Three quarters of the group in China intend to get ‘more advice and help’ and 53% accept ‘paid financial services.’
60% of them have complained about the low efficiency of Chinese banks.

Wang Ying from McKinsey & Company in Shanghai said, ‘Besides the basic bank functions, Chinese consumers expect more individual products and services, such as optional financial products for small-or-middle-sized entrepreneurs. There is large room for the investment and banks should seize the opportunity.’
Source: China.org.cn

The People’s Bank of China, China’s central bank (which should not be confused with the Bank of China or the Central Bank of China and has the power to control monetary policy and regulate financial institutions in China), has said it will require commercial banks to set aside more money in reserves to mop up liquidity and curb lending. This is the seventh such increase this year.

According to the People’s Bank of China’s website the reserve ratio — the amount of money a commercial bank must park at the central bank — will increase 0.5 percentage point on RMB deposits to 12.5% starting September 25.

The central bank said, ‘The move is aimed at managing liquidity in the banking system and curbing excessive growth of credit.’

The increase in the reserve requirement was the tenth since June 2006. Those steps were accompanied by four interest rate increases this year — the latest on August 22.

All of which are measures designed to rein in inflation and moderate the booming economy.

China’s Consumer Price Index, the main gauge of inflation, jumped 5.6% in July, the biggest increase since February 1997. This pushed the January-to-July inflation rate to 3.5%, above the central bank’s 3% target for the year.

Financial analysts expect more moves by the central bank later this year.

China’s M2, the broad measure of money supply including cash and deposits, grew 18.5% in July from a year earlier to RMB38.39 trillion ($5.05 trillion).
Source: Shanghai Daily

China Construction Bank Corporation has reported a whopping 47.5% year-on-year increase in its first-half net profit.

For the Jan-June period, the bank’s net profit rose to RMB34.3 billion ($4.5 billion) under international accounting rules, with earnings per share up 50%.

By the end of June, the bank’s total assets had increased 12.28% to RMB6,117.791 billion ($804.97 billion) compared with the end of last year and its non-performing loan ratio decreased 0.34 percentage points to 2.95%.

Which is the sort of report that directors always feel very happy giving to its shareholders.

China Construction Bank Corporation was listed in the Hong Kong stock exchange in October 2005. It issued 26.486 billion shares on Hong Kong stock market and raised $9.2 billion. The bank plans to float no more than nine billion RMB-denominated shares in China this year to supplement its capital.
Source: People’s Daily Online

Bank loans to China’s energy-consuming and high-polluting sectors slowed down in the first five months of this year as the government worked to save energy and reduce greenhouse gas emissions.

The China Banking Regulatory Commission (CBRC) said in a statement that outstanding loans from major Chinese banks to these sectors rose by RMB104 billion ($13.7 billion) in the first five months to RMB1.5 trillion ($198 billion). Notice carefully the word is trillion as in a thousand billion.

The increase was RMB52.7 billion (roughly $7 billion) less than the rise in the same period last year.

The energy-consuming and high-polluting sectors in China are those involving oil processing and coking, chemicals, construction materials, iron and steel, non-ferrous metals, and power generation.

Most new loans were granted to large firms with advanced production methods and environmentally friendly techniques, while financing was cut to small plants with high energy consumption and pollutant discharges.

Liu Chengxiang, a statistics official with the CBRC, said, ‘Banks have tightened control on lending to these sectors, but with their production still surging, the task of reducing energy consumption and emissions remains arduous.’ The CBRC, China’s banking watchdog, vowed to carefully check the banks where outstanding loans to the restricted sectors continue to soar.
Source: China View